Yahoo’s Mayer buying Tumblr for $1.1 billion in biggest deal

Yahoo! Inc. is buying blogging network Tumblr Inc. for about $1.1 billion as Chief Executive Officer Marissa Mayer seeks to lure users and advertisers with her priciest acquisition to date.

Tumblr, headquartered in New York, will continue to host its more than 108 million blogs, while CEO and founder David Karp, 26, will remain in charge of the website, “per the agreement and our promise not to screw it up,” Sunnyvale, California-based Yahoo said today in a statement.

Mayer, CEO of the biggest U.S. Web portal since July, is betting that Tumblr will help transform Yahoo into a hip destination in the era of social networking as she challenges Google Inc. and Facebook Inc. in the $17.7 billion display ad market. The price she’s paying -- about a fifth of Yahoo’s $5.4 billion in cash -- underscores the deal’s importance to Mayer’s turnaround effort, according to Zachary Reiss-Davis, an analyst at Forrester Research Inc.

“It’s an aggressive move,” Reiss-Davis said in an interview. “They are saying, ‘where is our next group of people who are going to spend many hours per week on Yahoo properties?’ It’s big bet that the answer is going to be Tumblr users.”

Yahoo’s shares declined as much as 2% to $26 in early trading. The stock had advanced 33% this year through May 17, compared with a 17% gain for the Standard & Poor’s 500 Index.

Adding Visitors

Adding Tumblr is expected to expand Yahoo’s audience by 50% to more than 1 billion monthly visitors, and increase traffic by about 20%, according to the statement. The transaction is expected to close in the second half of 2013.

“Our roadmap isn’t changing,” Karp said in the statement. “Our mission -- to empower creators to make their best work and get it in front of the audience they deserve -- certainly isn’t changing.”

Founded by Karp in 2007, Tumblr grew to log more than 13 billion global page views in the past month. The site offers a free service for publishing blogs on the Web and mobile devices, and tools for sharing photos and other content across social networks.

While Tumblr recently began letting advertisers pay for prominent placement and has said it expects to become profitable this year, Karp has resisted covering webpages with promotions to avoid alienating Tumblr’s younger audience.